Question 1

The Sarbanes-Oxley Act (SOX) forced companies to validate their internal financial control processes by:

Accepted Answer

A)  putting strict limits on the amount of non-audit fees (consulting or otherwise) that an accounting firm can earn from a firm that it audits. 
B)  requiring the CEO and CFO to return bonuses or profits from the sale of stock that are later shown to be due to misstated financial reports. 
C)  requiring auditing firms to have long-standing relationships with their clients and receive lucrative auditing and consulting fees from them. 
D)  requiring senior management and the boards of public companies to validate and certify the process through which funds are allocated and controlled. 
A)  putting strict limits on the amount of non-audit fees (consulting or otherwise) that an accounting firm can earn from a firm that it audits. 
B)  requiring the CEO and CFO to return bonuses or profits from the sale of stock that are later shown to be due to misstated financial reports. 
C)  requiring auditing firms to have long-standing relationships with their clients and receive lucrative auditing and consulting fees from them. 
D)  requiring senior management and the boards of public companies to validate and certify the process through which funds are allocated and controlled. D

Question 2

Use the table for the question(s) below.
Consider the following income statement and other information:
  
-Luther's EBITDA coverage ratio for the year ending December 31, 2009 is closest to:

Accepted Answer

A)  1.64 
B)  1.78 
C)  1.98 
D)  2.19 
A)  1.64 
B)  1.78 
C)  1.98 
D)  2.19 B

Question 3

Which of the following is NOT a financial statement that every public company is required to produce?

Accepted Answer

A)  Income Statement 
B)  Statement of Sources and Uses of Cash 
C)  Balance Sheet 
D)  Statement of Stockholders' Equity 
A)  Income Statement 
B)  Statement of Sources and Uses of Cash 
C)  Balance Sheet 
D)  Statement of Stockholders' Equity B

Question 4

Luther's return on equity (ROE) for the year ending December 31, 2009 is closest to:

Accepted Answer

A)  2.0% 
B)  6.5% 
C)  8.4% 
D)  12.7% 
A)  2.0% 
B)  6.5% 
C)  8.4% 
D)  12.7%

Question 5

Use the table for the question(s) below.
Consider the following balance sheet:
    
-If in 2009 Luther has 10.2 million shares outstanding and these shares are trading at $16 per share, then Luther's Market-to-book ratio would be closest to:

Accepted Answer

A)  0.39 
B)  0.76 
C)  1.29 
D)  2.57 
A)  0.39 
B)  0.76 
C)  1.29 
D)  2.57

Question 6

Use the following information for ECE incorporated:
Assets $200 million
Shareholder Equity $100 million
Sales $300 million
Net Income $15 million
Interest Expense $2 million
-If ECE's return on assets (ROA) is 12%, then ECE's net income is:

Accepted Answer

A)  $6 million 
B)  $12 million 
C)  $22 million 
D)  $36 million 
A)  $6 million 
B)  $12 million 
C)  $22 million 
D)  $36 million

Question 7

The change in Luther's quick ratio from 2008 to 2009 is closest to:

Accepted Answer

A)  a decrease of .10 
B)  an increase of .10 
C)  a decrease of .15 
D)  an increase of .15 
A)  a decrease of .10 
B)  an increase of .10 
C)  a decrease of .15 
D)  an increase of .15

Question 8

On the balance sheet, current maturities of long-term debt appears:

Accepted Answer

A)  in the Stockholders' Equity section. 
B)  in the Operating Expenses section. 
C)  in the Current Assets section. 
D)  in the Current Liabilities section. 
A)  in the Stockholders' Equity section. 
B)  in the Operating Expenses section. 
C)  in the Current Assets section. 
D)  in the Current Liabilities section.

Question 9

Luther's return on assets (ROA) for the year ending December 31, 2009 is closest to:

Accepted Answer

A)  1.6% 
B)  6.7% 
C)  2.3% 
D)  2.6% 
A)  1.6% 
B)  6.7% 
C)  2.3% 
D)  2.6%

Question 10

Which of the following statements regarding net income transferred to retained earnings is correct?

Accepted Answer

A)  Net income = net income transferred to retained earnings - dividends 
B)  Net income transferred to retain earnings = net income + dividends 
C)  Net income = net income transferred to retain earnings + dividends 
D)  Net income transferred to retain earnings - net income = dividends 
A)  Net income = net income transferred to retained earnings - dividends 
B)  Net income transferred to retain earnings = net income + dividends 
C)  Net income = net income transferred to retain earnings + dividends 
D)  Net income transferred to retain earnings - net income = dividends

Question 11

Which of the following statements regarding the income statement is INCORRECT?

Accepted Answer

A)  The income statement shows the earnings and expenses at a given point in time. 
B)  The income statement shows the flow of earnings and expenses generated by the firm between two dates. 
C)  The last or "bottom" line of the income statement shows the firm's net income. 
D)  The first line of an income statement lists the revenues from the sales of products or services. 
A)  The income statement shows the earnings and expenses at a given point in time. 
B)  The income statement shows the flow of earnings and expenses generated by the firm between two dates. 
C)  The last or "bottom" line of the income statement shows the firm's net income. 
D)  The first line of an income statement lists the revenues from the sales of products or services.

Question 12

Off-balance sheet transactions are required to be disclosed:

Accepted Answer

A)  in the management discussion and analysis. 
B)  in the auditor's report. 
C)  in the Securities and Exchange Commission's commentary. 
D)  in the statement of stockholders' equity. 
A)  in the management discussion and analysis. 
B)  in the auditor's report. 
C)  in the Securities and Exchange Commission's commentary. 
D)  in the statement of stockholders' equity.

Question 13

Use the table for the question(s) below.
Consider the following income statement and other information:
  
-Assuming that Luther has no convertible bonds outstanding, then for the year ending December 31, 2009 Luther's diluted earnings per share are closest to:

Accepted Answer

A)  $1.01 
B)  $1.04 
C)  $1.28 
D)  $1.33 
A)  $1.01 
B)  $1.04 
C)  $1.28 
D)  $1.33

Question 14

The Dodd-Frank Wall Street Reform and Consumer Protection Act does the following:

Accepted Answer

A)  Exempts firms with less than $75 million in publicly traded shares from some provisions of SOX. 
B)  Requires the SEC to study ways to reduce the cost of SOX for firms with less than $250 million in publicly traded shares. 
C)  Strengthens whistle-blower provisions of SOX. 
D)  All of the above. 
A)  Exempts firms with less than $75 million in publicly traded shares from some provisions of SOX. 
B)  Requires the SEC to study ways to reduce the cost of SOX for firms with less than $250 million in publicly traded shares. 
C)  Strengthens whistle-blower provisions of SOX. 
D)  All of the above.

Question 15

Use the table for the question(s) below.
Consider the following balance sheet:
    
-Luther Corporation's total sales for 2009 were $610.1, and gross profit was $109.0. Accounts payable days for 2009 is closest to:

Accepted Answer

A)  27.5 
B)  5.71 
C)  52.4 
D)  63.8 
A)  27.5 
B)  5.71 
C)  52.4 
D)  63.8

Question 16

Use the table for the question(s) below.
Consider the following income statement and other information:
  
-Wyatt Oil has a net profit margin of 4.0%, a total asset turnover of 2.2, total assets of $525 million, and a book value of equity of $220 million. Wyatt Oil's current return-on-equity (ROE) is closest to:

Accepted Answer

A)  8.8% 
B)  9.5% 
C)  21.0% 
D)  22.8% 
A)  8.8% 
B)  9.5% 
C)  21.0% 
D)  22.8%

Question 17

Which of the following statements regarding the balance sheet is INCORRECT?

Accepted Answer

A)  The balance sheet provides a snapshots of the firm's financial position at a given point in time. 
B)  The balance sheet lists the firm's assets and liabilities. 
C)  The balance sheet reports stockholders' equity on the right hand side. 
D)  The balance sheet reports liabilities on the left hand side. 
A)  The balance sheet provides a snapshots of the firm's financial position at a given point in time. 
B)  The balance sheet lists the firm's assets and liabilities. 
C)  The balance sheet reports stockholders' equity on the right hand side. 
D)  The balance sheet reports liabilities on the left hand side.

Question 18

Use the information for the question(s) below.
In November 2009, Perrigo Co. (PRGO) had a share price of $39.20. They had 91.33 million shares outstanding, a market-to-book ratio of 3.76. In addition, PRGO had $845.01 million in outstanding debt, $163.82 million in net income, and cash of $257.09 million.
-Perrigo's return on equity (ROE) is closest to:

Accepted Answer

A)  4.6% 
B)  9.1% 
C)  17.2% 
D)  27% 
A)  4.6% 
B)  9.1% 
C)  17.2% 
D)  27%

Question 19

Use the table for the question(s) below.
Consider the following balance sheet:
    
-If on December 31, 2008 Luther has 8 million shares outstanding trading at $15 per share, then what is Luther's enterprise value?

Accepted Answer

Enterprise value = Market value of equit

Question 20

If Alex Corporation takes out a bank loan to purchase a machine used in production and everything else stays the same, its equity multiplier will ________, and its ROE will ________.

Accepted Answer

A)  increase; increase 
B)  decrease; decrease 
C)  increase; decrease 
D)  decrease; increase 
A)  increase; increase 
B)  decrease; decrease 
C)  increase; decrease 
D)  decrease; increase

Exam 2: Introduction to Financial Statement Analysis

The Sarbanes-Oxley Act (SOX) forced companies to validate their internal financial control processes by:

Use the table for the question(s) below. Consider the following income statement and other information: -Luther's EBITDA coverage ratio for the year ending December 31, 2009 is closest to:

Which of the following is NOT a financial statement that every public company is required to produce?

Luther's return on equity (ROE) for the year ending December 31, 2009 is closest to:

Use the table for the question(s) below. Consider the following balance sheet: -If in 2009 Luther has 10.2 million shares outstanding and these shares are trading at $16 per share, then Luther's Market-to-book ratio would be closest to:

Use the following information for ECE incorporated: Assets $200 million Shareholder Equity $100 million Sales $300 million Net Income $15 million Interest Expense $2 million -If ECE's return on assets (ROA) is 12%, then ECE's net income is:

The change in Luther's quick ratio from 2008 to 2009 is closest to:

On the balance sheet, current maturities of long-term debt appears:

Luther's return on assets (ROA) for the year ending December 31, 2009 is closest to:

Which of the following statements regarding net income transferred to retained earnings is correct?

Which of the following statements regarding the income statement is INCORRECT?

Off-balance sheet transactions are required to be disclosed:

Use the table for the question(s) below. Consider the following income statement and other information: -Assuming that Luther has no convertible bonds outstanding, then for the year ending December 31, 2009 Luther's diluted earnings per share are closest to:

The Dodd-Frank Wall Street Reform and Consumer Protection Act does the following:

Use the table for the question(s) below. Consider the following balance sheet: -Luther Corporation's total sales for 2009 were $610.1, and gross profit was $109.0. Accounts payable days for 2009 is closest to:

Which of the following statements regarding the balance sheet is INCORRECT?

Use the table for the question(s) below. Consider the following balance sheet: -If on December 31, 2008 Luther has 8 million shares outstanding trading at $15 per share, then what is Luther's enterprise value?

If Alex Corporation takes out a bank loan to purchase a machine used in production and everything else stays the same, its equity multiplier will ________, and its ROE will ________.

The Corporation

Financial Decision Making and the Law of One Price

The Time Value of Money

Interest Rates

Valuing Bonds

Investment Decision Rules

Fundamentals of Capital Budgeting

Valuing Stocks

Capital Markets and the Pricing of Risk

Optimal Portfolio Choice and the Capital Asset Pricing Model

Estimating the Cost of Capital

Investor Behavior and Capital Market Efficiency

Capital Structure in a Perfect Market

Debt and Taxes

Financial Distress, Managerial Incentives, and Information

Payout Policy

Capital Budgeting and Valuation With Leverage

Valuation and Financial Modeling: a Case Study

Financial Options

Option Valuation

Real Options

Raising Equity Capital

Debt Financing

Leasing

Working Capital Management

Short-Term Financial Planning

Mergers and Acquisitions

Corporate Governance

Risk Management

International Corporate Finance

Filters

If Alex Corporation takes out a bank loan to purchase a machine used in production and everything else stays the same, its equity multiplier will , and its ROE will .